WEEKEND READING: HERA 2.0: aligning higher education regulation with England’s integrated skills economy

This blog was kindly authored by Professor Dave Phoenix, Vice-Chancellor of The Open University.

The Higher Education and Research Act (HERA) 2017 fundamentally reshaped the English higher education system. It introduced a regulatory framework centred on competition, student choice and market entry, underpinned by the belief that a well-regulated market would drive innovation, improve quality and deliver better outcomes for students. The Office for Students (OfS) was established to oversee this approach through a risk-based model of regulation.

Nearly a decade later, however, both the sector and the wider policy environment have changed significantly. This raises an important question: Can a regulatory framework designed primarily to promote competition between providers provide the right incentives at a time when government increasingly expects the sector to operate as part of an integrated tertiary education and skills system?

The limitations of a market-based regulatory model

The current system rightly uses measurable outcomes, including continuation, completion, graduate outcomes and financial sustainability, to inform regulation. But metrics shape behaviour. Where continuation and retention become central measures of success, providers will naturally focus on protecting those indicators.

Meanwhile, the provider landscape has become more complex. Diversity can bring innovation, but a more heterogeneous sector requires more sophisticated quality assurance, particularly where different provider cultures may respond differently to regulatory incentives, undermining the use of outcome measures as sole measures of risk.

Furthermore, the Post-16 Education and Skills White Paper, Local Skills Improvement Plans, devolution reforms and the Lifelong Learning Entitlement all point towards a future in which learners move more flexibly between technical, professional and academic routes. Success is increasingly defined by the effectiveness of the system as a whole, not simply by the performance of individual institutions in isolation.

These changes create two challenges for the current framework:

• First, recognition that educational quality cannot be captured through metrics alone. Quality includes academic standards, intellectual challenge, curriculum design, assessment integrity, access to resources, student support and the wider environment in which learners develop knowledge, skills and confidence. If institutions focus on meeting a measure rather than sustaining the underlying academic environment, the ability of current metrics to assess sector risk is reduced.
• Second, while the framework largely evaluates individual institutions, the skills agenda requires universities, colleges and employers to build coherent pathways and respond collectively to regional and national needs, which isn’t currently a focus of the framework.

These tensions are visible in debates about minimum entry requirements for access to funding, which seek to address institutional behaviour through additional headline thresholds rather than concerns around the underlying conditions of quality. At the same time, less attention has been given to the system-wide impact of losing key subject provision as financial pressures drive course closures, creating cold spots and impacting equity of opportunity.

The case for HERA 2.0

HERA 2.0 should preserve robust accountability while broadening regulation from institutional compliance towards educational quality, public value, collaboration and system stewardship. In this context, HERA 2.0 would need to reflect three shifts.

1. Quality review

Risk-based regulation should continue to use data on continuation, completion, graduate outcomes and financial resilience. A stronger model would combine absolute thresholds with two additional elements:

• Use of benchmark data including contextual and value-added measures reflecting students’ starting points, mode of study, subject mix, socio-economic background, prior attainment and engagement. This would show whether providers are generating strong outcomes relative to the learners they serve, rather than judging all institutions against crude sector averages. In effect this would create a value-added metric that asks not only whether students complete, but how completion is achieved and what educational gain has occurred, as already occurs in other parts of the educational sector. Benchmarks would support a risk-based methodology in which significant variations could trigger quality review by subject experts, as currently.
• Use of peer review as seen in Scotland’s Tertiary Quality Enhancement Review. International practice also points in this same direction. Australia’s TEQSA model is standards-based and risk-reflective, combining data with scrutiny of governance, staffing, facilities, student support and academic integrity. These systems do not abandon metrics; they embed them in a wider evidence base about the educational processes behind the numbers.

Independent peer review would provide judgements on quality and standards, while thematic reviews could examine issues raised by absolute or value-added metrics, including franchised provision, subject withdrawal, online delivery, assessment integrity, unusual completion patterns and work-based learning. This would therefore build on current work and could cover:

• quality, integrity, breadth and depth of academic provision;
• learner progression and successful outcomes;
• educational gain; and
• financial sustainability and governance.

2. Ensuring public benefit in exchange for public investment

Where institutions draw on public funding, taxpayer-backed student finance or public regulatory legitimacy, the test should extend beyond acceptable educational outcomes for individual students. Public investment in higher education should also secure wider public benefit: national capability, regional growth, expanded opportunity, international influence, strategically important provision and contribution to civic, cultural and economic life, for example.

The broader provider landscape created by HERA has brought diversity and innovation, but it has also exposed the limits of relying on market entry and a narrow set of performance metrics as proxies for public purpose. A system that attaches public funding mainly to recruitment and minimum outcomes risks rewarding providers whose incentive is to capture publicly backed income rather than contribute to long-term public value.

HERA 2.0 should therefore introduce a public value framework for all providers. Assessment should consider whether public funding supports activity that a purely commercial market would underprovide. This could take into account the provider’s mission and consider a basket of measures including, for example:

• employer engagement, labour market relevance and contribution to skills priorities;
• support for underserved communities and cold spots
• contribution to inward investment, innovation ecosystems, international partnerships and soft power; and
• civic engagement and wider national capability in terms of subject coverage and underpinning research.

This would set a clearer test for access to public funding, as providers would have to show that they deliver public benefit beyond private return. That would make the system less attractive to organisations focused only on extracting profit from publicly backed student finance, while supporting any provider that can evidence quality, integrity, sustainability and contribution to national or local priorities.

3. Supporting an integrated skills system

If government wants a coherent tertiary education system, the legislative framework should actively support collaboration rather than treat it as incidental. A more integrated system depends on a diversity of mission, with different providers contributing distinctive strengths to progression, local skills, research and innovation, professional education, work-based learning and lifelong learning.

Institutions could be encouraged to develop progression agreements with colleges, support credit transfer and recognition of prior learning, create flexible routes into higher-level study and recognise work with employers to keep provision aligned with labour market needs in line with their mission. The framework could therefore consider approaches to:

• Credit recognition
• Pathway development through flexible or local routes into and through higher education
• Research and innovation capability.

Conclusion

HERA responded to the priorities of its time. But policy environments change,and regulatory frameworks must evolve with them. England’s challenge is no longer simply how to regulate a higher education market, but how to build a tertiary education and skills system that supports growth, productivity, social mobility and lifelong learning. This is only going to become more complex as evolution seeks to balance national and local oversight around education, research and innovation needs

HERA 2.0 would retain institutional accountability while restoring an element of professional judgement, strengthening protection for students and public investment, and moving quality assurance beyond compliance towards educational enhancement. It would link access to public funding not just to regulatory compliance, but to demonstrable quality, learner success and public value.

It would also align regulation with a government agenda founded on skills, growth, opportunity and collaboration: moving beyond oversight of a market of competing institutions towards stewardship of an integrated system in which universities, colleges, employers and regional partners work together to expand opportunity and strengthen productivity. If the ambitions of the next decade are growth, skills, opportunity and lifelong learning, the regulatory framework should evolve to support them.